Africa Automotive News September-October digital issue 2019

is expected that in the short term fleet
growth will stabilise in a range between
4.5% and 5.5% per annum.
Vehicle Sales
Despite being the most populous
country in Africa, Nigeria’s
new vehicle sales lag behind
less populated countries such
as Algeria, Egypt, Morocco and
South Africa. According to industry
players, the overall new and secondhand
market combined ranges between
500,000 and 1 million units per year.
Smuggling, grey imports of second-hand
vehicles and the lack of reliable data
however, make the exact size of Nigeria’s
vehicle market and fleet size difficult
to quantify. Challenges concerning the
licencing and identification of vehicles
further contribute to this difficulty.
Africa auto marketImported second-hand
vehicles, so-called tokunbos, dominate
the Nigerian vehicle market as only
a small segment of society is able to
afford new vehicles. A representative of
a leading automotive firm estimates that
a mere 2% of the population is able to
afford new vehicles given the current
economic and financing environment.
While commercial banks offer vehicle
finance, accessing these credit facilities
has become increasingly unattractive to
individual consumers as credit facilities
are provided at interest rates above 20%
per annum and require at least a 10%
down-payment.
Commercial banks usually require
repayment of vehicle loans within four
years, due to the rapid depreciation of
the value of vehicles given poor road
conditions. According to one of the most
established vehicle finance providers, the
monthly repayment amount should not
exceed 35% of the monthly income of
the borrower. The short repayment-period
as well as the high interest rates present
a key challenge for low- and middleincome
households when it comes to
accessing vehicle finance.
Due to the limited accessibility to and
expensive financing of vehicles, new
vehicles remain out of reach for most
Nigerians and the largest share of current
vehicle demand comes from the business
community. Corporate buyers account for
approximately 70% of overall new vehicle
purchases, indicating the suppressed
demand from private buyers, arguably the
market segment with the largest growth
potential.
Through recently introduced promotional
offers by banks in partnership with
selected vehicle dealers, customers are
able to access finance at a discounted
rate for a limited number of vehicles
and models. Indeed, the provision of
alternative financing products, especially
in-house financing by the automotive
companies, is seen by industry players as
a key requirement for the growth of the
local market.
However, in the absence of affordable
finance solutions, secondhand vehicles
remain the more attractive option for
private vehicle buyers. According to a
representative of a leading automotive
company, second-hand passenger
vehicles accounted for 80% of sales
in 2014. The share of tokunbos in
the commercial vehicle market is even
larger, reaching up to 90% of the market
according to a leading commercial vehicle
manufacturer.
New vehicle sales are dominated by
Toyota which accounts for almost one
third of new sales. Hyundai and Kia have
established themselves as increasingly
serious competitors to Toyota due to
their competitive pricing and improved
image in terms of quality. In 2015, the
three Asian brands accounted for half of
new vehicle sales in the country.
The economic slowdown, the
depreciation of the naira and the increase
in vehicle prices due to the import duty
hike had a substantial impact on new
vehicles sales in 2015. Although vehicle
sales saw positive growth post the global
financial crisis, total new vehicle sales
dropped by more than half in 2015,
compared to 2014. The sharp decline of
sales highlights the absence of sizeable
and competitive domestic assembly that
could provide an affordable alternative to
imports and the dependency on vehicle
imports to meet domestic demand.
Production And Assembly
Nigeria is no stranger to automotive
assembly and manufacturing. Already in
the 1970s Nigeria started assembling
motor vehicles. In the 1970s and
1980s, the federal government of
Nigeria partnered with six international
automotive and commercial vehicle
manufacturers to produce passenger
and commercial vehicles locally from
CKD kits. According to the National
Automotive Council (NAC) these
six companies had an initial installed
capacity of 149,000 units per annum
during the 1970s and 1980s.
“Sometimes, cars are imported to be
stripped for parts as availability of
genuine parts is limited.”
In addition to these plants, the Federal
Government entered into five more
agreements with international automotive
companies to establish assembly plants in
1982, according to the National.
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September-October issue l 2019
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